Who is Affected
As of November 1, 2025, certain Massachusetts real estate transactions with a sales price of $1,000,000 or more will be subject to new tax withholding at closing. The new requirements are part of the Massachusetts Department of Revenue (DOR) recently issued regulations.
There are no new taxes or increases to any taxes in the regulations. Instead, it simply changes when the state collects tax on gains of certain sellers. For those sellers who are subject to the regulations, tax on the gain from the sale will be paid at closing instead of as part of an annual tax return.
How the Withholding Will Work
In most cases, the closing attorney will be the one responsible for withholding the tax and completing the appropriate forms. After closing, they will have 10 days to remit funds to the DOR. The regulations refer to the closing attorney as the “withholding agent.” For transactions with a sale price of $1 million or more, it is recommended to start communicating with the closing attorney a few weeks in advance of the closing to ensure a smooth closing.
Calculating the Withholding
The regulations spell out two options for calculating the amount of withholding. Because of the tax implications, sellers should consult with their accountant or CPA to determine the best option based on their specific tax situation:
- A simple withholding of 4% of the gross sale price.
- The seller can elect to use the “alternative withholding calculation,” which is calculated at 5% of the seller’s estimated net gain from the sale.
Who is Exempt
First, and probably most significantly, all full-time Massachusetts residents are exempt from the withholding requirement. Non-resident sellers, including current residents planning to move their primary residence out of Massachusetts, will generally be subject to withholding. In addition, there are a series of other exemptions applicable, including:
- Certain pass-through entities (businesses such as a sole proprietorship or partnerships where income “passes through” to the owners or partners, rather than being taxed at the entity level)
- A corporation with a continuing Massachusetts business presence
- An estate of a resident decedent or a resident trust
Even if a seller is exempt, a “Transferor Certificate” will still need to be completed and filed with the DOR.
The DOR has stated that withholding is not generally required for Transfers that qualify under IRS Code 1031 on the amount of any gain that is deferred for Massachusetts tax purposes.
REALTOR® Involvement
REALTORS@ with clients who may be subject to this requirement should provide their clients with a little extra encouragement to ensure they work with a qualified Real Estate Attorney who handles real estate conveyancing daily. REALTORS@ should inform sellers about the new rule to demonstrate awareness and to initiate communication with their attorneys a few weeks in advance of the closing. For technical or tax questions, REALTORS@ should refer sellers to their closing attorney or accountant.
These new regulations shift tax collection to the closing table for some transactions, so sellers should consult with their accountant in advance to ensure all required certificates and forms are ready. For additional information, see the DOR Overview and FAQs and the actual regulations 830 CMR 62B.2.4.
This blog is for informational purposes only and does not constitute legal or tax advice. We recommend you consult a qualified tax advisor regarding your specific situation.
Written by Attorney Michael McDonagh, General Counsel, Lamacchia Companies